About PSE

We are the only electricity transmission system operator within the territory of Poland. We play a key role in efficient functioning of the Polish economy. We care about the reliability of electricity supply to all regions of the country.

We also ensure the secure and cost-effective operation of the Polish power system as part of the common European system.

About PSE

Risk management

Tools used for risk management

PSE has the Risk Management Policy in place, under which risk management covers all areas of the company's operations, in particular ensuring continuity of electricity supply, provision of transmission services and implementation of investment processes.

The company's strategy for the years 2017-2019 indicates reliability, credibility and responsibility as the highest values on which our organisation’s vision and mission are based. Ensuring the compliance of PSE's activities with the above values requires, among others, predicting threats and opportunities resulting from events independent of the company, as well as the consequences of consciously made decisions. Risk management policy is a directional document aimed at coordinating, systematising and unifying the risk management activities undertaken by PSE.

The activities include:

identification, description and quantitative and qualitative assessment of uncertain events that may have a significant impact on the company's ability to achieve strategic, financial and operational goals and on its reputation,
selection of methods and tools that reduce the probability of occurrence and/or minimise negative risk effects or increase the probability and/or maximise positive risk effects,
maintaining identified risks within acceptable limits, by taking actions which are economically acceptable and take into account the justified level of security of the company's operations.

Risk management is an integral part of organisational and management processes at the company, and information obtained as a result of risk assessment forms the basis for effective decision-making, in particular regarding the allocation of financial resources.

Risk management at PSE consists in systematic application of planned and coordinated activities, procedures and practices in order to identify and assess events with potentially significant impact on the company's operations, followed by elimination or reduction of negative impacts – or reinforcement of positive impact – through the implementation of appropriately selected control mechanisms.

The basic risk management activities at PSE are as follows:

development and improvement of the risk management methodology,
identification, description, qualitative and quantitative evaluation of risks, and development of risk management plans,
carrying our risk reviews,
implementation of risk management plans and operational risk management.

The risk management methodology defines in particular:

organisation and manner of carrying out the risk review,
guidelines for the identification, analysis and evaluation of risks, and the manner of describing them,
rules for the quantification of the probability of occurrence and evaluation of the effects of risks,
guidelines for risk management, way of identification of risk control methods and tools as well as development of risk management plans and their monitoring.

The risk review is carried out at least once a year, and within its framework a register is prepared that summarises the risks material to the company and a risk map presenting the identified potential events in a graphical manner.

The identification and assessment process concerns risks, i.e. uncertain events or circumstances, the occurrence of which will have negative or positive consequences for the company's operations.

Then the risk management plan is prepared and implemented. It is performed by the individual organisational units, and its performance progress is monitored. In principle, risk management measures must be economically acceptable and take into account the need to maintain the required level of PSE's operational security.

The company is pursuing a range of new measures related to risk management in different business areas. These include:

Development of several concepts for the calculation of the required security level (for current BM settlements and adjusting settlements) in connection with a change of price limits in the BM since the beginning of 2019;
The development of the methodology and manner of carrying out the criticality/materiality scoring of the PPS infrastructure elements, which has already become a basis for maintenance planning, prioritisation and planning of repairs, including in a multi-annual cycle, as well as the development of standards for solutions used at electrical substations;
Work on the remodelling of the stochastic capacity reserve (stochastyczna rezerwa mocy – SCR) for its deployment as part of the MMS system; the remodelling concerns the IT, implementation and logical layer aspects;
The development of a new risk management standard for investment contracts, which includes combining contractual sanctions with key needs of our company, performance bond, insurance requirements, payment schedule, as well as work progress monitoring methods;
Monitoring the risk of PPS imbalance by launching a tool for the estimation of stochastic operating capacity reserve;
Developing the SMTA (short and medium term adequacy assessment) tool for the stochastic analysis of adequacy over the one-week horizon together with improving the flexibility of the tool according to the needs of ENTSO-E ;
Development of a prototype calculation tool for pricing the unavailability of transmission network elements, which will be used, among other things, in the contracting process under network investment projects

In 2018, the implementation of a risk monitoring system based on KRIs (Key Risk Indicators) was initiated. The KRI analysis provides information on changes and trends which constitute the basis for updating the risk measures (e.g. on the frequency of events and incidents).

In risk management, a professional IT tool developed by PSE GC specialists is used, which is regularly upgraded and tailored to current needs.

Risk management is part of each certified management system in place at the company. PSE analyses its impact on the natural environment and takes measures to reduce negative impact while pursuing initiatives that have a positive impact.

Risk map taking into account social and environmental risks

The risk map presents the risks identified in the course of risk review and qualified to be entered in the risk register. The vertical axis expresses the expected frequency of risk materialisation within a year, and the horizontal axis represents a measure of risk effects with the use of a monetary unit (PLN).

The measure of risk is defined here as the product of the sum of expected frequencies of materialisation of each of the causes of risk in a year, adjusted by the conditional probability of risk materialisation in case of occurrence of individual causes – and the total value of direct and indirect effects of its materialisation. The individual risks are presented on the map in the form of pie charts. The diameter of the circle indicates the total measure of the risk and the individual parts of the chart (colour scale) correspond to the categories of effects, which are:

ensuring business continuity expressed in MWh of energy not supplied,
direct impact on finances,
impact on health and life expressed as the percentage of health loss,
impact on the company’s image translated into reputation and expressed in a descriptive scale,
environmental impact.

All effects were shown as a monetary value, recalculated according to the algorithms accepted in the methodology.

Tab. 1. Characteristics of key risks

Risk name/description	Change of risk measure 2017/2018	Main causes	Impact	Risk management	Risk management Comment
1. Failure to implement on time key projects for power evacuation/ improvement of power supply conditions	Decrease	Delays due to reasons Social conflicts at the stage of planning and implementation. Lengthy determination of the legal status of land property or obtaining the legal title to use it.	Higher investment costs. Impact on the PPS – discontinuity of power supply. Damage to the company’s image	High standards required from contractors. Selection of the optimal routes and locations of network investment projects. Project monitoring Reporting standard	A high measure is the effect of downstream risks, including the risk of the long-lasting inability to evacuate power from JWCD for network-related reasons and the risk of introducing power rationing levels.
2. Extensive system failure (partial or total blackout) leading to complete interruption or reduction of electricity supply to consumers	Increase	Unavailability of more than one critical line of substation element of the PPS infrastructure. Failure in interconnected power systems (outside the PPS). Emergency outage of several generating units. Natural disaster – extreme weather phenomena. Faulty operation of automatic load shedding systems – shutdown of a PPS element.	Discontinuity of power supply. Losses of the national economy. Compensations for consumers. Loss of tariff revenue by the company. Loss of life and health in consequence of accidents, e.g. traffic accidents. Increased costs of congestion elimination. Significant damage to the national company’s image – negative media campaign.	Equipment restocking. Development and deployment of an outage scheduler MMS implementation. Coordination of network outage scheduling. Ongoing monitoring of meeting the criteria of network operation safety and removal of threats by changing the distribution of generation in the PPS. Acquisition of emergency assistance from neighbouring TSO . Training with the use of the PPS simulator. Reserve National Dispatch Centre.	The value of the monetary conversion rate of the estimated volume of energy not supplied (currently 13,815 PLN/MWh – the value equals the maximum price of the DSR IP demand reduction service under the Guaranteed Programme in 2018).
3. Damage to a critical substation element	Decrease	Damage to a substation element, e.g. switching apparatus, tap changer, (auto)transformer, transformer bushing, oil transformer, surge limiter. (Auto)transformer fire. Extreme weather phenomena. Poor technical condition of substation equipment.	Financial: cost of purchasing/replacing damaged elements of substation infrastructure Physical injuries (bodily damage), loss of life by bystanders present in the place where damage to an infrastructure element takes place. Damage to the company’s image. Environmental pollution.	Development of the assumptions of the failure rate testing methodology. Preventive replacements of the most depreciated and oldest grid assets. Protection of facilities. Experience and competencies of employees. Direct supervision of external companies carrying out works on station facilities.	A significant decrease in the number and duration of transformer failures was recorded.
4. Social conflicts that make it impossible to undertake key investments or impede timely completion	Decrease	Negative attitude of landowners. Lack of cooperation on the part of local governments and auxiliary units. Involvement of associations, non-governmental organisations or other specialised entities.	Failure to implement projects of key importance for power evacuation and improvement of power supply conditions. Additional cost of engaging specialised mediators. Cost of taking additional actions of an investment nature (e.g. realignment /extension of the line route) Negative media campaign.	Selection of the optimal routes and locations of network investment projects. Agreeing the line route with the participation of local communities. Individual approach to stakeholders. Supervision over communication activities carried out by the project contractor. Development and implementation of a public communication programme at the level of individual investment tasks, including the dialogue with stakeholders.	Despite a decrease on a year-on-year basis, the risk measure remains at a high level owing to the escalation of certain conflicts to the supra-local level.
5. Imposition of power rationing levels due to long-lasting capacity shortfall in the PPS	Decrease	Long-lasting insufficient level of capacity reserves in some PPS locations due to low availability of generating units. Permanent outages of existing capacities, e.g. due to failure to adjust to BAT. Natural disaster – extreme weather phenomena. Long-lasting failure of a phase shifter.	Discontinuity of power supply. Losses of the national economy. Compensations for consumers. Loss of tariff revenue. Increased costs of congestion elimination. Significant damage to the company’s image.	Agreements on 4-year maintenance schedules with generators. Stochastic analysis of generation adequacy. Agreement on the Power Market Rules.	Decreased probability of the proposed EU regulations (winter package) necessitating the imposition of power rationing levels.
6. Long-term inability to evacuate power from JWCD for network reasons	Decrease	Inability to evacuate power from generating units due to failure or unavailability of a substation/line. Failure to complete on time key projects for power evacuation/ improvement of power supply conditions. Damaged critical line or substation asset.	Discontinuity of power supply. Losses of the national economy. Increased costs of congestion elimination. Damage to image.	High standards required from contractors. Selection of the optimal routes and locations of network investment projects. Project monitoring. Application of reporting standards.	High value despite a decrease in 2018.

Fig. 1. Risk map